What is a Sinking Fund?
The Sinking Fund is a contribution collected from property owners in a villa, house, or condominium project. It is typically collected only when purchasing directly from a developer, but owners in older developments might agree to top up the fund if it’s running low.
The sinking fund is collected to have a fund to be used for unexpected expenses and larger jobs, like repairs, renovations, painting of the exterior, fixing or renewing the elevators, swimming pool, pathways, roofs, etc.
Typically the sinking fund is held by a property management company for emergency use, but if the developer offers in-house property management to its buyers, the developer will collect the amount directly.
- What’s the difference between a Sinking Fund and a Common Area Maintenance Fee?
- How much is typically collected for a Sinking Fund in Thailand?
- How Frequently Does the Sinking Fund Need to be Paid?
- Why is it Important to Have a Sinking Fund?
- Is There a Sinking Fund Paid on Every Property Purchase?
- Is the Sinking Fund Refundable in the case of a sale?
What’s the difference between a Sinking Fund and a Common Area Maintenance Fee?
The management also collects a Monthly Common Area Maintenance Fee, or a Common Area Fee (CAM fee), from the owners. This fee is commonly used for day-to-day maintenance and smaller repair jobs.
When something unexpected occurs or needs to be replaced entirely, CAM fees are insufficient. In those cases, the management company uses the Sinking Fund to do the necessary work.
Common area fees usually cover the salaries of the staff working onsite. Meanwhile, the Sinking Fund is only used for emergency, unexpected, or urgent repairs, fixes, or job changes.
How much is typically collected for a Sinking Fund in Thailand?
This depends on the project. Typically, in Phuket, it varies between 100 THB and 800 THB per square meter. If you buy a condo unit with a 30-square-meter useable area, you’ll end up paying between 15.000 THB and 24.000 THB when you purchase the unit from the developer.
When buying a villa, the contribution to the sinking fund is typically calculated from the land plot of the property, not the built-up area or living space. So if you purchase a pool villa with a 350 square meter land plot, you are looking to pay something between 35.000 THB to 280.000 THB, depending on the project,
How Frequently Does the Sinking Fund Need to be Paid?
In many cases, this amount is paid only once. The Sinking Fund is collected as a One-Time Payment and never used unless necessary. But in some cases, the compound needs a serious repair job or some addition, so the legal team discusses with the unit owners and asks for a top-up or another set of Sinking Fund collections. This will be decided collectively by the unit owners, not only by the management company.
Why is it Important to Have a Sinking Fund?
The sinking fund is important because this fund pretty much guarantees that your compound will always be well maintained. Living in a well-maintained compound makes all the difference in the world. In Phuket, there are some nicely built condominium or villa projects, but the management company isn’t doing a good job, and the projects look 10 years older than they actually are. In some cases, common areas stink, the pool has a lot of missing tiles, and the elevator looks like it came from a horror movie.
If there is not a decent property management company to collect the Sinking Fund and Maintenance Fees regularly or properly and use them when necessary, you will have a tough time selling your property in the future. The value of your property will decrease dramatically and it won’t be your fault. So overall Sinking Fund and who is collecting it are two important topics.
Is There a Sinking Fund Paid on Every Property Purchase?
No. It is usually paid when you purchase a property directly from the developer. If you buy a resale property from an individual owner, chances are the first owner already paid for it. Then again, sometimes the compound runs low on the Sinking Fund, and they may ask you to top up. Then, you need to investigate the case on your own.
Is the Sinking Fund Refundable in the case of a sale?
No—Once you pay the Sinking Fund, it is already added to the property management company’s accounts. Although it is not refundable, you have all the rights to ask the management company to give you an update on how much of it is used for which tasks and how much is left in the back at any time.
Meet the Author
With extensive expertise in Phuket’s property market and Thai property laws, as well as deep connections with local developers, Nuno co-founded one of the largest real estate agencies in the region. Recently, he launched his own venture, Storm Real Estate, specializing in a carefully curated selection of properties that meet his high standards. Unlike larger agencies where frequent staff turnover can disrupt client relationships, Nuno is committed to offering a stable, one-on-one experience with himself or a member of his team of experienced property consultants, from initial consultation through purchase and beyond. By prioritizing quality over quantity, he ensures that each client’s unique needs and budget are met, making dream homes a reality.
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Do not hesitate to contact us if you have any further questions on the subject, or if you would like to know more about property in Phuket in general.
